The city of Waukegan is holding a special meeting Monday evening to discuss its budget, which proposes a $3.5 million operating deficit while keeping the personnel headcount flat, upping overtime so that all fire stations are fully manned and continuing an emphasis on infrastructure improvements.

The city’s new fiscal year starts May 1, shortly after which four new aldermen will join the ranks of the Waukegan City Council and vote on the proposed budget.

The $180 million budget includes a $75 million general fund budget plus infrastructure improvements funded through debt taken out last year, according to the proposed budget.

Those improvements include $9 million for roads, $3 million for sidewalks and $3 million for alleys, street signs, lights and traffic signals, according to Mayor Sam Cunningham’s letter to the council and public. More than $13 million in improvements is also proposed for the city’s water plant and the larger water, sanitary and stormwater system.

Cunningham said he’s still trying to chip away at the deficit piece by piece despite his proposal projecting a larger deficit than last year’s.

He said part of the challenge is that the Waukegan City Council voted unanimously to keep its property tax levy for operational and pension expenses flat despite the city being locked into nine union contracts that promise raises.

The city is also estimating its share of sales and income tax revenue will fall this coming year, according to the proposed budget.

Salaries and benefits make up 88% of the general fund’s expenses, according to the draft budget. About 80% of city employees belong to a union.

Cunningham’s goal is to take an aggressive line on raises — no more than 2% unless other concessions are made — as contracts come up for negotiation in the coming years, he said.

He said the reason that didn’t happen this past fall with the patrol officers union was because the city needed to get out of another costly provision.

The new four-year contract approved in a 7-1 vote eliminated a so-called “me too” provision Cunningham has said led to never-ending cycles of negotiations and gave the city greater flexibility on health insurance but included cost-of-living increases of 2.5% for the first two years, followed by 3.25% the following two years.

Increases of that size are not something the city can do forever, Cunningham said.

“We just can’t do it,” he said in an interview Friday. “It’s just not sustainable.”

Cunningham’s other long-term goal is start selling city-owned property that would otherwise be used for commercial or residential development, he said.

The city has identified all the property it owns, has been preparing recommendations on what should be kept and what should be sold, and is looking to get the properties appraised, he said.

Once out of the city’s tax-exempt hands, the properties will begin generating property tax dollars, according to Finance Director Tina Smigielski. Then, depending on what goes on the site, the city could also see new sales tax dollars or jobs created.

“There’s a lost opportunity there,” she said. “There’s a lot of land that’s not reaching its full potential.”

The city has enough money in reserves to cover the projected deficit, Smigielski added.

The budget also proposes some new spending, including upping the Waukegan Fire Department’s overtime budget so that the chief can fully staff all five fire stations.

The issue was central to several aldermen’s election campaigns and remains a part of the ongoing negotiations with the firefighters union.

While the union wants to see the minimum number of firefighters required per shift increased, Cunningham said he wants to keep the discretion of whether that additional staff is needed on any particular shift with Fire Chief George Bridges Jr. and his team.

According to Cunningham, the chief had already been using overtime dollars to increase staffing at the city’s two jump stations, and the additional dollars will mean he can continue to do that as he sees fit.

“That process worked,” Cunningham said.

The Waukegan Fire Department is the only city department seeing its general fund budget increase this year, with a requested $1.4 million or 7% increase, the proposed budget shows.